The updated USDA Feedstock Carbon Intensity Calculator helps producers quantify regenerative practices such as cover crops, improved nutrient management, and conservation tillage—including no-till and reduced tillage. Most importantly it’s the last piece of the puzzle for farmers looking to get a premium for those feedstocks through the 45Z tax credit.
The technical guidelines establish a framework to connect regenerative agriculture practices to new markets within the biofuel supply chain for:
- Corn
- Soybeans
- Sorghum
- Spring canola
“The IRS still has to take some steps forward. The Department of Energy still has to take some steps forward, but the words on the page from the IRS is that they intend to utilize the rules coming out of USDA,” says Mitchell Hora, an Iowa farmer and founder of Continuum Ag. “For 45Z and regarding farmers and the feedstock, we finally have that rule, so we’re able to act with at least more clarity than what we had before.”
As Hora explains, the value created is a tax credit for the ethanol plant, which at year-end can determine its share of the value to farmers in the supply chain. His latest calculation per the latest rule from USDA estimate for every five points you can lower the carbon intensity score, it brings about 10 cents a gallon—or 30 cents a bushel–in shareable value to the table.
Translated to the acre, that could mean $40 or $50 per acre with no practice change required. He says both early and new adaptors can use USDA’s new released feedstock carbon calculator to determine a CI score on their crops based on the regenerative ag practices used and prove they’ve lowered their carbon footprint.
“The bottom line is we know now that the calculator is good enough to move the needle and to drive some serious economic opportunity for the ethanol plants and for the farmers,” Hora says.
The work that is required is data collection, organization and sharing. And it requires a direct relationship with the biofuels plant.
“The key thing is it’s mass balance, not book and claim, which means this is only applicable to those that are delivering their physical crop into the biofuel supply chain, either directly delivering it to the crusher or to the ethanol plant, or go into an elevator who then delivers it a biofuels producer,” Hora says. “Book and claim would have decoupled and then you could sell the crop where you want to sell the crop and sell the data separately, it’s not that you have to keep the data and the crop together.”
Hora says the CI score must be verified by a third party vendor like his company but establishes what their score is worth to their local ethanol plant when produced into low carbon fuel.Which will translate into a premium for producers.
Economic Opportunity of Lower Carbon Fuels
North Dakota farmer Mike Appert can already attest to the benefits of low-carbon fuel markets.
“Our ethanol plant was one of the first in the nation to do the CO capture storage, and we actually were able to sequester right on site on our own land because we’re above the geological formation,” he says. it’s really about giving the customer what they want, and we initially did it for California and the West Coast, they wanted the low CI store fuel, and so we did that, and you know, we were getting, you know, we were adding about $1 per bushel for the value of corn.”
